Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAEmployee share plans in Europe and the USA: anoutlineFurthermore, securities for the purpose of the Prospectus Directive are definedas "securities which are transferable and negotiable on the capital market". Boththe European Commission and the majority of the members of the Committee ofEuropean Securities Regulators (CESR) have indicated that in their view (whichhas no binding force) non-transferable options granted under an employee shareplan generally fall outside the scope of the Prospectus Directive, which is veryhelpful for companies operating share option plans.In February 2009, CESR published some "short-form prospectus" rules that willbenefit many non-EU listed companies operating employee share plans in theEU. The short-form prospectus can omit various items of information (as set outin CESR guidance) which would otherwise be required under a full prospectus.In June 2010, the EU Parliament approved (and the EU Council is expected toapprove before the end of 2010) a number of amendments to the ProspectusDirective, including some amendments to the employee share plans exemption.The employee share plans exemption is to be extended to all companies whosehead office or registered office is in the EU. This applies regardless of whetheror not the company is listed (or where that listing, if any, is). Companies whichare established outside the EU will qualify for the exemption if they are listed onan EU regulated market (as is the case under the current exemption wording) orif they are listed on a "third country market" which is recognised by the EUCommission (under a formal process) as being governed by a regulatory regimeequivalent to the EU regulatory regime. In such a case, the company will berequired to provide "adequate information" including the employee informationnote referred to above. Member states are expected to be given 18 months toimplement the changes to the employee share plans exemption (and the otherchanges to be made to the Prospectus Directive) once those changes have beenbrought into force by the EU. In the meantime, the current employee shareplans exemption remains in force.Certain of the other exclusions/exemptions on which companies may be able torely when making an offering under an employee share plan are to be extended:• the exemption which applies to offers made to fewer than 100 individuals permember state is to be increased to fewer than 150 individuals per memberstate; and• the exclusion which applies where the consideration for the offer over aperiod of 12 months is less than €2.5 million (across the EU) is to beincreased to less than €5 million (across the EU).Although the Prospectus Directive came into force more than 5 years ago, manyof the issues raised by the Prospectus Directive remain unresolved. Furtherinformation on the effects of the Prospectus Directive and the implementinglegislation is separately obtainable from Clifford Chance.UK/1729295/03 2 September 2010